In Spain a property purchase is a process that can be broken down in several steps:
1) Collection of Background information
The first step is to request a “Nota Simple” from the Land Registry (Registro de la Propiedad). A “Nota Simple” is a standardized report describing the property in all its aspects including:
- Present owners and the percentages of ownership
- Debts, liens, charges and rights on the property. Typically these could be mortgages or claims for unpaid taxes.
- Any type of rights on the property. For example rights of way, sewers and underground cables.
- Boundaries of the plot where applicable
- Total area of the land, and of the house if there is one, including the area on the different floors.
- Land classification: rural, urban, or non-urban/rural land…
- Description of the property including the house description if there is one.
In Spain, it is perfectly normal to tie debts to a property. These debts could be transferred to the next owner in the case of sale. Therefore the land registry makes this information available to the potential buyer.
It is important to check that the description in the nota simple conforms to the real condition of the property, as large differences could be the result of non-declared works or illegal buildings.
It is of paramount importance to check local planning permission to see if there are problems related to the legality of the property. Unfortunately foreign buyers often pay a down payment before checking the legality of the property.
When the seller is a company it is important to check for solvency in the Commercial Registry and identify who is the signatory for the company.
Find out the market price of comparable properties in the same area to check if the sale price is fair.
Check if the community charges (most of Spanish properties belong to a community of owners) are up to date with payments and if the local municipal taxes (IBI) are paid.
The bank will ask for several documents relative to the buyer and the property to be purchased (see appendix A). The bank will also arrange an appraisal of the property. The valuation will be done by a specialized company (sociedad de tasacion), (appendix B). He will also check for any apparent structural problems with the property. The bank will charge a fee of around 500 euros for the surveyor or “tasador”. The bank will send a mortgage offer for the buyer to sign. The whole mortgage process might take several weeks and therefore it is important to take this into account when agreeing on the purchase deadlines in the private contract.
3) Private contract
Unless the property is purchased immediately the buyer and the seller will sign a private contract to hold the property until the public sales deeds is finalized. In practice it is a contract of intent between both buying and selling parties containing specific conditions. Typically the buyer will pay the seller or his lawyer, a deposit (a percentage of the final price, usually 10%) in exchange for the right to purchase the property within a specific time. If the buyer breaches the contract he will lose the deposit while if the seller breaches the contract he will have to pay the double the amount of the deposit to the buyer. The bank will normally ask for a copy of this document to know the conditions.
4) Signing of the deeds
The property transfer and the mortgage deeds will be signed at the notary office.
What is a notary public?
A Notary Public is an officer authorized to attest contracts and other extrajudicial matters. The notary public attests the identification and capacity of the parties, taking care to verify that all documentation is in order, the content of financial and non financial terms of the mortgage are drafted in accordance with current regulations, report on key aspects of the sale (such as price, payment method and physical aspects of housing and urban development), reporting on the consequences of not paying taxes, etc. The notary public does not substitute a lawyer who will make sure that the correct searches are done.
In Spain notary publics do not take care of the inscription of the mortgage deeds or the purchase deeds at the land registry, if there is a mortgage the work will be done be the legal representative of the financial institution.
A representative of the bank with a valid power of attorney will be at the notary office at the signing of the deeds in order to sign the mortgage deeds with the buyer or the buyer’s legal representative. If the seller had a mortgage on the property the representative of his bank will be there to cancel the previous mortgage. Therefore, if necessary, there will be three deeds to be signed: the cancellation of the seller’s old mortgage, the buyer’s new mortgage deeds and the property transfer. The amounts to be transferred between the parties will be agreed on in advance in order to have the cheques will the correct amounts ready at the signing.
All parties will be there in person or entrust a proxy with a power of attorney.
The buyer will have to pay:
- Transfer tax if the property is resale. This can vary in different autonomous regions.
For resale properties
|Imposable base bracket||Transfer tax rate|
|0.00€ to 400,000.00€||8%|
|400,000.01€ to 700,000.00||9%|
|700,000.01 and above||10%|
For resale of properties qualified as garages
|Imposable base bracket||Transfer tax rate|
|0.00€ to 30,000.00€||8%|
|30,000.01€ to 50,000.00||9%|
|50,000.01 and above||10%|
- VAT of 10% if it is a newly built property.
- The buyer will pay stamp duty: 1.5% of the price of the property for new properties.
- In the mortgage deeds the amount of taxes to be paid in Spain varies in each region, in Andalucía it is 1.2% of on the mortgage responsibility.
The taxes have to be paid within 30 days from the date of purchase.
The seller will pay:
- The plusvalia, the local capital gains tax. This amount is calculated based on the number of years the property has been in possession of the vendor, and on the cadastral value of the property. If the vendor is non resident in Spain the tax should be retained by the purchaser’s lawyer or the bank’s legal representative. If this is unpaid the town hall will place a debt on the property.
- The Central Government capital gains tax. Capital gains tax for residents is 19% for the first 6,000€ and 21% for the rest of the gain obtained from the sale of the property. For non-residents it is a flat rate of 19%.
- The buyer is legally obliged to retain 3% of the property price and pay this amount directly to the tax office on the vendor’s behalf within 30 days of the purchase; as long as the vendor has not provided a valid certificate issued by the tax office proving he is fiscal resident in Spain, at the time of signing the sales purchase deeds
6) Land Registry
Finally the new deeds will have to be registered at the land registry where the property is located. The land registry will notify the bank’s legal representative and the notary if the deeds have any defects. Normally the parties intervening at the signing of the mortgage deeds at the notary, grant power of attorney to the bank’s representative to modify the mortgage deeds or clarify any issues related to the terms and conditions where necessary, based on the request provided by the land registry office.
Most banks add a clause in the mortgage deeds in order to protect their interest if for any reason the mortgage can not be inscribed at the land registry, in these cases the borrower will have to return the money to the financial institution.
Appendix A – Documentation typically requested by the bank for a mortgage
- DNI/NIE number. (Foreigners must apply for a NIE number before they can buy a property in Spain.)
- Employment contract
- Last 3 payslips
- The latest income tax return
- Private contract with the seller
- Town hall certificate demonstrating that the council property tax (IBI) on the property is up to date with payments.
- Details of other mortgages or loans that the requester may have
- All property deeds, both in Spain and overseas
- Certificate from work authorities (vida laboral), showing your past work history if working in Spain.
- Records of current assets (bank/mutual fund statements, shares, etc.)
- Prenuptial agreements, if any
- For non-residents, A non-residency certificate
- If self-employed and working in Spain: Local tax on economic activities (IAE).
- If self-employed: Records of assets during the last two years
- If self-employed: VAT paid for the last quarter and last year
Appendix B – Appraisal companies approved by the Banco de España
AFES, ALIA, ARCO, ARQUITASA, ARTASA, ASEVASA, CATSA, CMS, EBROTASA, EUROVAL, GTI, GESVALT, GLOBAL, IBERTASA, INMOSEGUROS, INTA, INTRASER, KRATA, LKS, MUTASA, SERVATAS, SOCIEDAD DE TASACIÓN, SIVASA, TASA, TABIMED, THIRSA, TH, TINSA, TASAMADRID, TYCSA, TASAGALICIA, TASALIA, TASASUR, TASIBÉRICA, TECNITASA, TECGLEN, VALMESA, VTH, VALTECNIC
Appendix C – Mortgages types and length in Spain
Variable rate mortgages are the most common in Spain. In variable rate mortgages the rate will be based on the Euribor plus a fixed value typically 1% to 2%. There are also fixed rate and interest only mortgages, but these are less common in Spain.
The length depends on the age of the borrower. Typically the length will be from 10 to 30 years or longer if the borrower is young.
Banks will lend to a maximum amount of 80% of the property appraisal or the property price. Most of them will lend 60% to 70% for non-residents.
For further information regarding mortgages, commissions charges and other fees contact us.